Why do only a handful of companies excel at cultivating customer loyalty?

The story state of Customer Experience

Dave Brocks latest post (selling disguised as relationship management) and Beyond Philosophy’s Global Customer Experience Management Survey (2011) which made the point that a lot of stuff that is not Customer Experience is being badged as Customer experience got me thinking about this sorry state: lots of talk, lots of people with the right titles, lots of spend on technology and yet the same old organisational behaviour. Which begs the question: why it is that only a few companies truly excel at Customer Experience and customer-centricity? Now I can list all the usual candidates: spaghetti like systems, silos, channel proliferation, organisational design, conflicting agendas & metrics and so forth. That is exactly what I am not going to do because I believe that these are red herrings that are used to paper over what is so. So let’s take a skeptical look at business and see if this sheds any light.

The smuggler, the border guard and the wheelbarrow

Every day a man turns up at the border with a wheelbarrow and some stuff in it. Every day the border guard examines the stuff in the wheelbarrow convinced that the man is smuggling something. Some days the stuff is clothes, other days footwear, sometime watches, sometime blankets yet none of the stuff in the wheelbarrow is contraband and so the border guard reluctantly allows the man across the border. This goes on and on until the border guard retires. Shortly after that the border guard and the man meet accidentally and the border guard asks him to say what he was smuggling. The man replies “Wheelbarrows!”

Let’s stop for a moment and look at the whole customer stuff: customer satisfaction, customer focus, customer loyalty, customer relationship management, customer experience and customer-centricity. And ask the question: what is right in front of us that we are missing? What is our ‘wheelbarrow’?

The name of the game is neither Customer Experience nor customer-centricity

Is it easy to do well in a truly competitive industry? No, it is hard work. What is the ideal scenario for every company in a competitive space? To become the monopoly supplier. Why is this appealing? Because, you can dictate terms to the customers and they have to play ball. When you are in that position you do not have to bother with all this nonsense about customer focus: customers are difficult, being customer focussed is hard work and besides it stops you from making monopolistic rents. If you cannot have a pure monopoly then you can get something like it – and oligopoly. This is where a small bunch of companies control the market: they sell similar products, at similar prices, in similar ways and have the same business models. In effect, they ‘agree’ to carve up the market and the profits. Often these industries have high barriers to entry and so there is no real competition: think banks, utilities, telecoms…….The last thing that any CEO, Board of Directors or shareholders want is a truly competitive market. Why? Because you have to fight for customers and their wallet. Which brings us to an important point.

What has changed is that the traditional means of attaining this outcome no longer work as well as they used to. Originally there was control over valuable natural resources and distribution channels. Later, control of intellectual property and shaping the mind of the consumer through advertising, branding and PR. Since the rise of the internet the traditional means (resources, distribution, IP, advertising..) have not been working that well. Just think of the disruptive power of the internet: you no longer need stores and all the capital that goes with that; your market is the whole world and you do not even have to setup a website – you can pitch your tent at ebay and sell to the whole world; and customers are awash with useful information that makes them better informed, smarter decision makers and more discriminating buyers. This is why we have heard and read so much talk about targeted marketing, relationship marketing, permission marketing, personalisation, customer focus, customer service, customer experience, customer-centricity.

Does that mean that there has been a wholesale transformation of the heart (love of the customer) or of the head (change in worldview)? I am think that there has been no such change. The game is still the same: to orchestrate the levers of power to become monopolistic suppliers and thus extract monopolistic rents. And if that is not possible then many businesses do the utmost to get the better of customers (too many option, complicated pricing, misleading advertising, dumbing down customer service etc) to maximise short term profits. If it is the ‘age of the customer’ (IBM says it is) then we are talking about many businesses being dragged kicking and screaming into the ‘age of the customer’. Many if not almost all would prefer the good old times when customers had no voice, no power and simply put up with what they were given. Take a good look at the laggards (you know who they are) and you will notice that they still hold monopoly type positions, accrue monopolistic rents and continue to pay lip service to customer service and ‘the customer is king’.

If you see this then you can see the ‘wheelbarrow’ that is right in front of us and which we may have been missing: the vast majority of businesses want and strive to become monopolistic suppliers so that they can monopolistic rents without the hard work of being customer-centred. If you accept this then you can understand that whilst the titles of changed from “Sales” to “Relationship Manager” the hidden objective is the same: sell more, increase “share of wallet”. You can also understand why business process management, lean, cost-cutting via self-service technology, customer service, marketing etc have all been rebadged as Customer Experience – changing labels is the easy part and Drayton Bird has an excellent/witty post on this. Put differently, all the talk of customer focus, customer service, CRM, Social CRM, customer experience and customer-centricity is simply the bric-a-brac in the ‘wheelbarrow’ that prevents us from seeing the ‘wheelbarrow’ for what it is. Any real form of customer-centricity (as opposed to the talk) is being brought on by new entrants to the battleground. And by the power wielded by customers who now have the technologies and platforms to be better informed, make smarter decisions and make their voices heard.

To excel at customer-centricity, Customer Experience and customer loyalty you have travel along the road less travelled

Which bring me back to my original question: why do only a handful of companies excel at cultivating customer loyalty? Because by design or by accident the people who started these companies operate from a customer centred paradigm and have built customer-centred business models, cultures and organisations.And the leaders of these companies were willing to play the long term game. How long did it take for Amazon to become profitable? What about Zappos? Is USAA simply a vehicle for churning out profits for shareholders or an organisation with a mission to service members of the armed forces? Starbucks is a great example of a company that made it fortune by understanding customers human needs and delivering them (“the third place”) and then got itself into trouble by forgetting this mission (and associated values, operating practices) and chasing growth and profitability targets set by the analysts. Starbucks had to go back to the basics to connect with their customers and win them bac

Perhaps this handful of companies (Amazon, Starbucks, USAA, Zane Cycles, Zappos..) will provide the inspiration for authentic customer-centricity: O2 (UK mobile telecoms operator who does not think of itself as that) is a company that has embraced customer-centricity with a fervour that is necessary to be an experience services brand and organisation. In the process it has become the leader in the UK telecoms industry: brand, revenues, subscribers, profits. The recent Ofcom results show that “The least complained about mobile provider….was O2, with 0.02 complaints for every 1000 customers compared to 0.14 in the case of 3UK.” This is remarkable when you consider that O2 was spun off from a former state monopoly BT in 2001. And birth O2 was viewed as a second rate player in the telecoms market and some doubted its future prospects. Maybe more executives will follow the lead of O2 and genuinely orient their companies around customer, customer experience and customer-centricity.

A final word

To excel at Customer Experience and customer-centricity you have to have an affinity for people as human beings. I will go further and say that you have to connect with and care about your customers as human beings first and wallets second. Going even further I’d say you have to love your customers and show them that you love them. In my view this is and has always been the great (hidden) strength of Steve Jobs and Apple: a deep affinity for the misfits, the rebels, the people out to create a more beautiful world. If you can see merit in what I am saying then I recommend that you read the following insightful post by Pete Abilla: How to be human

What do you think?

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Author: Maz Iqbal

Experienced management consultant working at the intersection of strategy, customer, and technology. Combine a tendency to think strategically with a penchant for getting my hands dirty at the coalface of implementation.
View all posts by Maz Iqbal

Great points. As to your question I believe that when companies are led by professional managers who have no heartfelt connection with the guiding principles/values of the company then the scene is set for all growth/profit at the expense of the customer. Starbucks provides an interesting example of a company that did just that and then the founder (and the creater and holder of the vision and values) had to return and balance the drive for growth with the upholding the values and delivering on the customer experience. Of course the classic example is Steve Jobs and his reinvention of Apple by taking it back to Steve’s vision of what Apple stands for. IBM was another company that fell into that pit and then was turned around by Gerstner.

There seems to a law of humankind: power leads us to dehumanise the other. Only a few resist this tendancy.

Hi Maz,
Really interesting post and a great question. My two-penneth is that the most successful companies talk less about it and do more about. Those that shout the loudest about customer experience etc etc may be better suited to expending their efforts on doing more and talking less.